Conflicting Messages (and Goals) in China Create Increased Need for Preparation by Foreign Companies
On 22 March 2016, the China Supreme People’s Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases (II) (the "New Interpretations"). They took effect last week, on April 1.
In China such interpretations released by the Supreme People's Court can be used by the courts as legal precedent, and as such, are a big deal. The New Interpretations include 31 articles regarding important patent litigation issues such as claim construction, contributory infringement, Standard Essential Patents (SEPs), injunctive relief, and damages calculation, and other issues are covered focusing on reasonableness of claim construction and balancing the interests of the patent owner and the public. The most important provisions are discussed below.
Article 21 stipulates that "[w]here a party has clear knowledge that certain products are the materials, equipment, parts and components, intermediate items, etc. specifically for the exploitation of a patent, and yet still provides, without licensing from the relevant patentee, such products to another party committing the patent infringement, the people’s court shall uphold the claim by the right holder that the party's provision of such products is an act of assistance for infringement as prescribed by Article 9 of the Tort Liability Law." (Emphasis added).
Shifting of Burden for Proving Damages to the Accused Infringer
Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant. Specifically, in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer, the court may require the defendant to submit damages evidence. If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials, the people’s court may determine damages based on the reasonably supported claims of the patent holder.
Article 26 provides that where the defendant is found liable for patent infringement, the people’s court shall generally uphold the request of the right holder that the defendant be ordered to stop the infringement. However, if the national interests or public interests will be hurt by enjoining the acts of patent infringement, the people's court may, instead of providing injunctive relief, order the defendant to pay reasonable monetary damages.
Further, Article 25 provides that a good-faith user of an infringing product may not be required to cease infringement if such user submits evidence proving that it has paid reasonable consideration for such product. Good faith in this context requires that the user show that it had no actual knowledge and should not have reasonably had such knowledge that the product was manufactured and sold without a license from the patent holder.
Ten of the Articles relate to claim construction.
Article 4 makes a common sense determination regarding obvious errors in claims. Specifically, where a person of ordinary skill in the art can clearly arrive at only a single unique understanding by reading the claims, written description, and drawings despite ambiguity in terms of grammar, wording, punctuations, graphics, symbols, or other errors, the people’s court shall make determination according to such unique understanding.
Article 5 clarifies that technical features described in the preamble (as well as the rest of a claim) shall be construed as limiting.
Article 8 relates to functional claiming (analogous to mean-plus-function claiming in the U.S.). It clarifies that functional features are technical features that serve to define structures, compositions, steps, conditions or the relations thereof in terms of their functions or effects in the relevant invention, unless those of ordinary skill in the art could directly and clearly determine the specific exploitation methods for achieving such functions or effects by reading the claims alone (emphasis added). Importantly, the time for determining functional limitations is the time when the infringing act took place, not the filing date. This differs from US law.
Standard Essential Patents
Article 24 makes several clarifications, including the following:
Basically, although it is not specifically required, the best course is for an owner of a SEP to approach a potential licensee before filing a lawsuit and seek a license under FRAND terms. If this is done and the accused infringer refuses to negotiate or license, then all bets are off and the patentee can proceed.
The New Interpretations are a mixed batch for patent owners, but are generally positive. Plus, they provide greater structure and certainty to a Chinese patent litigation model that has rapidly evolved into one of the most effective and useful systems in the world.
The most useful provision is the effective codification of a practice that several IP courts had been using lately: shifting the burden of proving damages to the defendant once the patentee does a reasonable job with the available public resources of putting together a damages model. That is, the patentee will put together a damages model as best they can, and the judge will turn to the defendant to produce documents or other evidence contradict the patentee's argument. If the defendant does not provide rebuttal evidence, then the judge will accept the patentee's proof even if there are holes that cannot be filled with public evidence. This is fair and makes sense because of the lack of discovery in China and puts the onus on the party with the relevant documents -- the accused infringer -- the provide them to the court or accept the patentee's reasonable damages model.
Another useful provision specifically acknowledges the existence of contributory infringement, and to some extent the requisite proof. It appears that the accused contributory infringer must have knowledge of the patent and that the components it provides are needed for the exploitation of a patent. The Interpretation does not mention whether the accused contributory infringer can raise as a defense its belief that the patent was not valid, so this is not likely a defense, although obviously actual invalidation is a defense as in any case.
Welcome to the China Patent Blog by Erick Robinson. Erick Robinson's China Patent Blog discusses China's patent system and China's surprisingly effective procedures for enforcing patents. China is leading the world in growth in many areas. Patents are among them. So come along with Erick Robinson while he provides a map to the complicated and mysterious world of patents and patent litigation in China.
Erick Robinson is an experienced American trial lawyer and U.S. patent attorney formerly based in Beijing and now based in Texas. He is a Patent Litigation Partner and Co-Chair of the Intellectual Property Practice at Spencer Fane LLP, where he manages patent litigation, licensing, and prosecution in China and the US.
The ideas and opinions at ChinaPatentBlog.com are my own as of the time of posting, have not been vetted with my firm or its clients, and do not necessarily represent the positions of the firm, its lawyers, or any of its clients. None of these posts is intended as legal advice and if you need a lawyer, you should hire one. Nothing in this blog creates an attorney-client relationship. If you make a comment on the post, the comment will become public and beyond your control to change or remove it.